Chapter 4 Banking

Learning Unit Objectives #4 Banking Learning Unit Objectives The Checking Account; Credit Card Transactions LU4.1 Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements Correctly prepare deposit slips, write checks

Learning Unit Objectives #4 Banking Learning Unit Objectives Bank Statement and Reconciliation Process; Trends in Banking LU4.2 Define and state the purpose of the bank statement Complete a check register and a bank reconciliation Explain the trends in online banking

Checks/Drafts Written order instructing a bank, credit union, or savings and loan institution to pay a designated amount of your money on deposit w/the bank to a person or organization Drawee- Bank ordered to pay Drawer - One who writes the check Payee - To whom check is payable

Deposit Slip - Fig 4.1 IpswichBank 53-7058 March 4 09 ipswichbank.com Gracie’s Natural Superstore 80 Garfield Street Bartlet, NH 01835 Date ________________ 20 __________ DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL IpswichBank ipswichbank.com 211370587 88190662 Checks and other items are received for deposit subject to the provisions of the uniform commercial code or any applicable collection agreement 53-7058 March 4 09 USE OTHER SIDE FOR ADDITIONAL LISTING. < ENTER TOTAL HERE.

The structure of a check - Fig 4.2 Gracie’s Natural Superstore 80 Garfield Street 53-7058/2113 No. 633 Bartlet, NH 01835 88190662 Pay ____________________20 _____ To The Order of ____________________________________________________$ ___________________ _________________________________________________________________ DOLLARS IpswichBank ipswichbank.com Memo____________________________ _____________________ :211370587 88190662 633 0000006000 March 8 09 xx 6,000 100 Staples Corporation xx Six Thousand and 100 Office Equipment Molly Kate

Types of Endorsements Blank Full Restricted Pay to the order of Ipswich Bank For deposit only Gracie’s Natural Superstore 88190662 Gracie’s Natural Superstore 88190662 Pay to the order of Ipswich Bank Gracie’s Natural Superstore 88190662 Only person or company named in the endorsement can transfer the check to someone Limits any further negotiation of the check Can be further endorsed

Bank Statement A statement of different types of activity that have taken place during the month Debit - decreases the account - Credit - increases the account +

Bank Statement

Check Register Used to track written checks RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT Number Date Description of Transaction Payment/Debit x Fee Deposit/Credit Balance 633 12/15 Staples Co. 75 35 -75 35 2009 12/18 Deposit 412 78 +412 78 634 12/22 Health Food, Inc. 79 33 649 78 391 68 316.33 729 11

Transactions not entered in checkbook Bank Reconciliation Reconciles the difference between the bank statement and the checkbook Bank Statement Checkbook Differences in timing Transactions not entered in checkbook

Reconciliation Bank Balance +Deposit in transit -Outstanding checks Checkbook Balance +EFT (electronic funds transfer) +Interest earned +Notes collected +Direct Deposit -ATM withdrawals -Automatic withdrawals -NSF check -Online fees -Automatic payments -Overdrafts -Service charges -Stop payments +/-Book errors Bank Balance +Deposit in transit -Outstanding checks +/-Bank errors Bank Statement Checkbook

Steps in Reconciling Account 1) Identify outstanding checks 2) Identify deposits in transit 3) Analyze bank statement for transactions not recorded in check register 4) Check for recording errors in checks, deposits, addition or subtraction 5) Compare the adjusted balances, if different repeat steps 1-4

Bank Reconciliation GRACIE’S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2009 Checkbook Balance Bank Balance Gracie’s checkbook balance $6,588.42 Bank Balance $11,863.02 Add: Add: EFT leasing: Bakery dept. $1,808.06 Deposit in transit 3,383.26 EFT leasing: Meat dept. 4,228.00 $15,246.28 Interest 56.02 Error: Overstated ck # 634 720.00 6,6812.08 $13,400.50 Deduct: Deduct: Service charge $28.50 Outstanding checks: NSF 104.00 No. 638 $572.00 EFT Health Insurance pymt. 722.00 854.50 No. 639 638.94 No. 640 166.00 No. 641 406.28 No. 642 917.06 2,700.28 Reconciled balance $12,546.00 Reconciled balance $12,546.00

Trends in Online Banking Increase Use of Internet New Bank Legislation Role of Middlemen in the Internet

Problem 4-9: Solution: Sue’s Checkbook Balance $604.30 Bank Balance $ 315.65 Add: Add: Interest 5.15 Deposit in Transit 1,215.15 $609.45 $1,530.80 Deduct: Deduct: Service Charge $ 6.50 Outstanding Checks: Overdraft 25.00 31.50 No. 250 $603.15 No. 253 218.90 No. 254 130.80 952.85 Reconciled Balance: $577.95 Reconciled Balance: $ 577.95

Challenge Problem Solution: Checkbook Balance: $ 985. 20 Bank Balance: $1,430.33 Add: Add: Interest $ 2.33 Deposit in Transit 931.08 IRS Refund 1,030.05 1,032.38 $2,361.41 $2,017.58 Deduct: Deduct: Gas Company $ 135.20 Outstanding Checks: ATM Fee 6.50 No. 235 $138.20 Service Fee 8.00 No. 237 184.13 Debit (5x$.45) 2.25 No. 238 118.12 Printing 3.50 155.45 No. 239 38.83 499.28 Reconciled Balance $1,862.13 Reconciled Balance $1,862.13